"the next president of the united states please follow the rules!"
2024-09-20
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the u.s. federal reserve announced on september 18 local time that it would lower the target range of the federal funds rate by 50 basis points to a level between 4.75% and 5.00%. this is also the first interest rate cut by the federal reserve since march 2020.
according to the federal reserve's forecast, interest rates will drop to 4.4% by the end of the year, to 3.4% next year, and is expected to drop further to 2.9% the year after.
screenshot of reuters report
however, the american economics community has a different take on the current u.s. economic situation and industrial policy.
"america first" harms america itself
as the world's largest economy and the main issuer of international currency, the united states' monetary policy choices have important spillover effects on the world economy.
the federal reserve is now trying to revive the us economy, which is on the verge of recession, by easing monetary policy and avoiding a hard landing. however, the us economic growth momentum has been completely wiped out by the repeated mistakes in fiscal, monetary, financial and industrial policies, and it is somewhat powerless to revive the economy.
just this month, two sets of freshly released data revealed the current reality of the us economy.
the first set of data comes from a report released by the institute for supply management on september 3: the u.s. manufacturing purchasing managers' index (pmi) in august was 47.2, marking the fifth consecutive month of contraction in the u.s. manufacturing industry and the 21st contraction in the past 22 months.
the report said that the august pmi was lower than expected, raising concerns about slowing us economic growth.
screenshot of the report from the us consumer news and business channel
another set of data released by the u.s. bureau of economic analysis and the u.s. census bureau showed that the u.s. international trade deficit in july was us$78.8 billion, reaching the highest level since mid-2022, and the increase in the deficit was higher than analysts' expectations.
economists said the data confirmed that trade continued to be a drag on u.s. economic growth at the start of the third quarter.
screenshot of the report from türkiye's anadolu agency
the two sets of data seem to have no direct relationship, but they actually prove the same thing: "america first" has harmed the united states itself.
for example, one of the main reasons why the u.s. trade deficit "exploded" in july was that the biden administration had previously announced plans to impose additional tariffs on a variety of imported goods, ranging from electric vehicles to solar panels. u.s. companies are likely to have stockpiled imported goods before the tariff increase, causing import growth to far exceed export growth.
since the beginning of the trump administration, "trade" has always been the core issue of the white house. in order to minimize the trade deficit, the united states has distorted the global industrial chain and supply chain, and even launched a trade war against major trading partners including allies.
after the biden administration came to power, it further generalized the concept of "national security" and successively introduced protectionist trade and investment policies such as the "chips and science act" and the "inflation reduction act". these policies attempted to bring high-quality manufacturing back to the united states, but the results were not satisfactory.
the financial times reported last month that according to incomplete statistics, the chips and science act and the inflation reduction act are expected to provide a total of more than $400 billion in subsidies for various industries, but in terms of progress, many of the projects announced in a high-profile manner at the time have now stalled.
according to a survey by the financial times, about 40% of the large projects worth more than 100 million us dollars announced within the first year of the two bills taking effect were postponed or suspended indefinitely. among the 114 large projects tracked by the financial times with a total value of approximately 227.9 billion us dollars, projects with a total value of 84 billion us dollars were postponed. in addition, the news of the postponement of some projects has not yet been announced.
the report quoted the chief economist of agricultural bank of china as saying that the large number of project delays highlights how difficult it is for the united states to move strategic industries back to the united states.
screenshot of the financial times report
the united states is promoting industrial policies to protect its own interests
it is generally believed that the united states has triggered a new round of industrial protectionist competition at the expense of the industrial interests of its european and asian allies, causing serious disruptions to the global supply chain.
europe, for example, is currently facing the threat of additional tariffs if trump returns to the white house.
trump once again used his "america first" economic agenda during his campaign, vowing to impose tariffs of up to 20% on all imported goods. he even bluntly issued a new warning to us trading partners, including the european union: if they dare to "de-dollarize" when doing business with the united states, they will face a 100% us tariff.
screenshot of the financial times report
in asia, the latest example of being "cheated" by the united states is the obstruction of nippon steel's acquisition of u.s. steel.
last year, nippon steel corporation announced plans to spend more than $14 billion to acquire the 122-year-old u.s. steel corporation and turn it into a wholly-owned subsidiary, but the acquisition plan encountered multiple obstacles in the united states.
in addition, the acquisition plan was unanimously opposed by us president biden, vice president and 2024 democratic presidential candidate harris, and republican presidential candidate trump.
the reason why the three of them "faced the outside world in unison" was simple: pennsylvania, where amtrak's headquarters is located, is a key swing state in this year's u.s. presidential election, and the votes of members of the united steelworkers union are what presidential candidates from both parties want to compete for.
the biden administration has extended its review of nippon steel corporation's proposed acquisition of amtrak, according to people familiar with the matter, which will delay a decision until after the november election.
many analysts believe that this merger and acquisition is likely to fail due to the political disputes in the us election year.
screenshot of the washington post report
the council on foreign relations website said that the biden administration has been seeking to enhance economic ties with u.s. allies, but now opposes mergers between u.s. companies and japanese companies, which raises questions about washington's commitment to its allies and its openness to foreign investment.
screenshot of the report on the council on foreign relations website
the american magazine foreign policy published a group of letters to the next president of the united states. among them, joseph stiglitz, nobel prize winner in economics and famous professor at columbia university, wrote that the united states has been warning other countries not to implement industrial policies in the past few decades, but now the united states itself is implementing industrial policies and a strategy to maintain its own technological advantages.
the letter said that in two large bills, the chips and science act and the inflation reduction act, the united states blatantly violated wto rules. this raises a deeper question: if the united states only abides by the rules when they suit it or when rogue behavior will not be punished or constrained, does international law still have credibility?
the letter bluntly stated that it is in the interests of the united states to establish a world order based on cooperation and respect, so no matter who becomes the next us president, "please play by the rules."
screenshot of a report from the us magazine foreign policy
